Protecting Property and Profits

July 18, 2003 -- The House of Representatives soon will take up H.R. 2427 concerning the re-importation of drugs from foreign countries. The policy debate over this issue seems to pit two free market principles against one another. The free trade principle is invoked by those who want to allow Americans to re-import from Canada pharmaceutical products that American companies have shipped to that country for sale. The prices for those products in Canada are generally well below the prices in the United States.

But American pharmaceutical companies counter that the property rights principle means that they should be able to sell their products for whatever prices and on whatever conditions they wish to set, including barring Canadians who buy their products from reselling them in the United States.

But free trade is simply an extension of the more basic right to private property, the right of individuals to dispose of their property as they see fit, based on the mutual consent of buyer and seller. A contract defines the terms of sale, and the purpose of government is to protect contracts, that is, property.

The principal reason that prices for American pharmaceuticals are lower north of the border is that the Canadian government, through various policies, controls those prices. American manufacturers are not free to charge what they wish. This is an act of state-sponsored theft by the Canadian government, stealing from American manufacturers part of the revenue they could earn on their products. Allowing Canadians to send such low-priced products back to America would be trafficking on stolen goods.

To make up for lost revenues, the American companies need to charge more in the United States for those same products. Also adding to the price is the cumbersome U.S. Food and Drug Administration drug approval process, which accounts for a significant part of the nearly $900 million that it costs to develop a new product. The high prices in the United States have given rise to charges that American producers are "profiteering," and support for re-importation to reduce those profits.

This reaction reflects extreme moral and cultural confusion. Pharmaceutical companies profit literally by saving our lives, curing our illnesses, and easing our pain. They should be celebrated for those achievements. But instead of having statues erected to them in parks, they find predatory politicians seeking to rob them of what none of those politicians were capable of creating. Of course, most attempts to develop new, successful drugs fail, and without the incentives of huge profits, development of these products would dry up and we would all suffer. It's time for moral clarity. The U.S. government should not be a party to the looting of these companies. It can begin opposing Canada's practices by freeing up the entire health care system here in America from government controls.